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Legal Guidelines for Corporations and the U.S. Attorney General

Submitted by Anonymous (not verified) on Fri, 06/19/2009 - 00:00

To begin with, a corporation is a legally existing entity authorized to implement all kinds of business activities within the law. Today corporations are widely spread in the USA; nearly every strong enterprise has the status of a corporation. Like any other official establishment a corporation has certain rights, privileges and liability. Let’s see them in detail.

Legal rights and privileges of a corporation:

1) Corporations are officially allowed to issue and sell stock. All the ownership of a corporation is divided between shareholders, who provide some share balance.

2) According to the mode of sale there are two types of corporations: private and public. Shares of a public corporation are open for sale and have no restrictions for potential owners. However, not anyone, but only stipulated individuals, can become shareholders in a private corporation. A corporation can repurchase the stock it has earlier sold or even give it away (for example, as a charity).

3) Corporations can declare dividends and pay them. Current income is the source of paying dividends, which are allowed in two forms: shares or cash. Those people, who receive their dividends in cash, are to pay special duty (income tax) the year they get the money. In case of neglecting the tax payment a shareholder is charged with breaking of the administrative law and prosecuted in court by special tax attorney working under the leadership of the U.S. Attorney General. The Attorney General is also to monitor the activities of corporations with the help of his associates. If some law violations are fixed, the case will be brought to court.

Dividends from stock can be received by their owners only when the shares are sold. Corporations may also split the stock, and this doesn’t have an effect on the value of shares for their owners. Usually split of the stock is used to cut the price in order to raise stock marketability.

4) Corporations have limited liability, which can be both an advantage and disadvantage. The positive side is in encouraging new investments for the corporation. But we can admit the negative side: when shareholders become active participants of business processes in the corporation, they start playing essential role in “producing” losses in corporation.

5) A corporation has the fundamental right to run a business connected with selling some services or products.

6) Corporations have the authority to possess, sell or rent/lease personal or private property.

7) Corporations have the right to file a lawsuit against other commercial entities.

8) Separate corporations can merge into joint ventures.

Limitations of corporations:

- Corporation is subject to various risks, litigation, and is to pay income tax.

- Being a business entity, a corporation takes risks of financial losses or bankruptcy.

- A corporation can be both the initiator of litigation (the claimant) and the subject of it (if being sued by some persons).

- Corporations are directed to pay income tax (federal and state) on the calendar year profit.